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Saturday,  Nov 25,2017,04:56 (GMT+7)

Central bank seen relaxing rule on short-term capital

Cao Ban
Thursday,  Aug 24,2017,22:11 (GMT+7)
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Central bank seen relaxing rule on short-term capital

Cao Ban

HCMC – The draft of a new State Bank of Vietnam (SBV) circular relaxes the regulation on the use of short-term capital for making medium and long-term loans at local banks, foreign bank branches and other credit institutions.

The draft, which amends Circulars 36 and 06, provides a three-year roadmap for lowering the maximum ratio of short-term capital which is raised from the public and then used to provide medium- and long-term loans from 50% to 40%.

Since the date of the new circular going into force to the end of this year, the ratio would be 50% at local banks and foreign bank branches and 90% at non-bank credit institutions. It will drop to 45% between January 1 and December 31, 2018 and 40% from January 1, 2019 while non-bank credit institutions would maintain 90%.

If the draft circular is passed, the central bank would raise the maximum ratio of short-term funds used for making medium and long-term loans to 45% for 2018, up from 40% as required by Circular 06. The ratio of 40% will be applied in 2019.

The adjustment is based on an evaluation of data from the central bank, macro-economic factors, the nation’s economic situation early this year and the Government’s policy orientations towards the end of 2017.

Speaking a conference between the Prime Minister and business executives in May, SBV Governor Le Minh Hung said medium- to long-term credit accounted for around 53% of total outstanding loans. Meanwhile, medium- to long-term deposits made up just 15%, putting the banking system at stake.

To facilitate investment activity in the economy, the central bank still allows a 50% ratio at banks to meet financial needs of local enterprises. Due to the underdeveloped capital and stock markets, banks remain the key capital supply channel for the economy.

Commenting on the draft circular, the HCMC Real Estate Association (HoREA) proposed the SBV maintain the ratio at 50% until the end of 2018 to help fuel economic growth and prop up the real estate market.

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